Making Wall Street Pay.

On January 6, 2014, investor and financial consultant, John O’Donnell joined Mike Cosentino on Democratic Perspective to discuss the Financial Transaction Tax (FTT). The Financial Transaction Tax is also known by the misnomer, Robin Hood Tax. Although various forms of the FTT have been around since 1694, it was embraced by economist John Maynard Keynes during the Great Depression as a way of discouraging the type of excessive speculation that led to the market crash in 1929. “In the 1930’s, the Financial Transaction Tax was doubled, said O’Donnell, “But it was eliminated in the 1960’s.” Had it been in place, we likely would have never experienced the Wall Street crash of 2008.

And the need for the tax may be even greater now.

Currently, large money interests are using computer software programs to make tens of thousands of transactions daily. These transactions are designed to take advantage of the tiny fluctuations in stock prices that occur throughout each day. They are not investments in the traditional sense, intended  to give the company issuing the shares the working capital it needs. This so-called micro-trading is merely high-tech gambling. Indeed, such traders pay to be located as near as possible to the New York Stock Exchange in order to shorten the milliseconds needed for computers to complete such transactions.

The Financial Transaction Tax, if reinstated, would add a fraction of a penny to the cost of each stock transaction. The cost for ordinary Americans would be very little. “It would be about $18 per year for someone with $100,000 in a 401k. But those who trade by the second would pay a signficant amount,” said O’Donnell. It would discourage the kind of micro-trading that destabilizes the markets while generating billions of dollars each year.

As Cosentino pointed out, “A half cent or a third of a cent tax would generate up to $135 billion per year.” That’s money that could be used to secure Medicare and Social Security. It could be used to help people out of poverty. Or it could help pay down the national debt.

And as O’Donnell reminds us, “The Financial Transaction Tax would cause the industry that caused the problem in 2008 to pay.” He went on to say that he is afraid it will become a victim of competition between the political parties. “The Tea Party should be for this…most people should be for this, but I’m afraid that it will be treated as a matter of competition,” O’Donnell explained. That has not been the case in other countries. Currently, 30 countries have some form of FTT, including Australia, Belgium, France, India, Italy, Japan, Singapore, Sweden, Switzerland, Taiwan and the United Kingdom.

It has broad support in the US, including the support of politicians and economists; religious and opinion leaders. View this link for a partial list of supporters.

Of course, there are also many myths about the Financial Transaction Tax. Check out this link for a list. A great source for more information is the Center for Economic and Policy Research. Check it out here. And be sure to listen to the podcast of the complete show.

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